Why Adam Smith Can Solve The Skills Gap - Kloodle

Why Adam Smith Can Solve The Skills Gap

By April 15, 2020 No Comments

I have recently toiled through Adam Smith’s “On the Wealth of Nations”. The ideas presented in his epic work of genius are perception-changing if not slightly laboured. The Father of Economics is a fan of labouring a point and digression. He leaves no detail out and describes each of his principles with such levels of clarity that Wealth becomes a difficult read in sections.

The core tenet of Smith’s work is the concept of the Invisible Hand and market forces. Human requirements were, for years, catered for through two mechanisms: force from above or family tradition. The feudal system required these two mechanisms to ensure things got done. Generations of families were farmers, blacksmiths, carpenters or bakers. They provisioned the population of their wares because that’s what their father did. And his father before that. Ad infinitum. Goods that did not get produced this way, but were of equal requirement, were demanded by force from the ruling classes. They told their people what to do.

As people and power became more mobile, and the invention of money became the method of extracting value from society, market systems were created to determine the supply and demand for goods. If, for instance, a cold winter was in the offing, and the people demanded more coats, producers supplied more coats. Nothing was produced that wasn’t wanted. If it was, the market would simply not consume these surplus goods, prices would go down, profits reduce, ability to produce goods declined and therefore supply went down, raising prices back to their normal levels. Adam Smith recognised these mechanisms and coined the term The Invisible Hand. The concept stated that man, by acting in his own selfish interest, consumed and produced that which society wanted. His selfish want of money would cause him to bake bread, which society paid for because it needed bread, thus realising the baker’s want for money, and society’s want for bread.

Smith admonishes monopolies of any type. He argued that monopolies break market forces and cause inefficient production and consumption of goods. Artificially rigging the market caused supply of goods that weren’t wanted, at a price people couldn’t afford and caused conditions that led to all sorts of economic problems. Around this time, the government imposed “The Corn Laws” which tariffed foreign-produced corn. This enabled local producers to charge higher prices and realise higher profits due to stifled competition. Corn cost an arm and a leg. People couldn’t afford it and starved, yet the landowners, who had a vested interest in expensive corn, were the people able to lobby parliament and keep these laws.

Giving the people what they want is the core principal of supply and demand. If there’s no demand for your product, then don’t supply it. Businesses are currently bemoaning “The Skills Gap”. This is a supply and demand problem. UK industry is demanding a type of person with a particular skill set, and we are producing people with a different set of skills. These people are left on the shelf, as they are not in demand, leading to unemployment. Companies are incapable of diversification through a lack of required skilled people so they struggle to realise profits. Companies aren’t bound geographically. If they can’t get the skills here, they’ll uproot and move abroad. Smaller UK companies will simply die from an inability to compete.

Yet we’re imposing our equivalent of The Corn Laws. We prescribe an educational tariff that stipulates what a young person’s education should look like?—?i.e. the national curriculum. Just as the Corn Laws ensured the supply of English corn regardless of the demand for cheaper foreign alternatives, so the national curriculum ensures the supply of one type of future employee, regardless of the demand for other types of skills.

We continue to prescribe this medicine. Our schools still teach derivatives of the same concepts they have taught for nigh on a century. New skills that industry requires are left by the wayside. Another economist, Joseph Schumpeter, suggested that companies can only continue to realise a profit if they are innovative and entrepreneurial. His definition of entrepreneurship was the discovery of new and innovative ways to realise a profit. As businesses become more complex, innovation becomes more difficult. Schools need to produce individuals capable of this type of innovation. Yet innovation is NOT found by being able to answer an exam question, in a prescribed fashion, exactly how the examiner wants to see it.

Innovation requires a core foundation of skills such as communication, ability to work as part of a team, creativity, an ability to be a lifelong learner, an experimental attitude, an ability to evaluate outcomes and critically analyse situations. We should be creating young people who have these core skills by exposing them to new and novel situations where they can demonstrate these skills. Rote learning of content will not create these types of people. Innovative education that exposes students to problems day in, day out will.

Businesses need to shape this curriculum. They are the people who will eventually demand the services of education’s product. They, therefore, need to take an active role in shaping what is being taught. Curriculum needs to be centred around a core group of skills that are applicable in any context. Businesses then should provide the stimulus for what should be taught. Students will then learn as a consequence of responding to these external stimuli.

Education should be designed to equip us to face the challenges of life. Martin Lewis, of MoneySavingExpert fame, has campaigned for the inclusion of financial education in the curriculum for years. The fact that response has been slow and uptake sporadic provides insight into the challenges we face in shaping education to demand.

For example, a statistics lesson could revolve around a challenge provided by a local business to measure the rate of people who land on their company’s website to those who convert to paying customers. Students will then learn about rates of change, percentages, scientifically measuring statistics etc through solving a real problem. Teachers could crowd source these challenges through networks of local businesses. Employees of organisations could provide challenges that they face in their job to students. Teachers could select from the most relevant and most appropriate.

Better still, students could select which challenge they wish to solve. They could be exposed to a list of real-world challenges derived from local business situations?—?or even a national database of business problems?—?each problem broken down into the subject it relates to. Students then have to get a team together and select a problem to solve. The teacher then facilitates each group in solving that particular problem. Lessons are unstructured. Exams don’t exist. Students record their work and the results of what they’ve learned on a personal profile……

Businesses can then see the people who are able to solve real business problems. Certain people will excel in the maths-based problems. Others will be good at technical challenges. Others still may be amazing at understanding the diversity of people through a deep understanding of religious beliefs and faiths a company’s work force possesses. All the while, a students will be afforded real context of what they’re learning and rely on their core skills to actually solve problems and develop their knowledge.

The safety net of exams would be removed. Would this create problems in terms of measuring the success of our schools? What would happen if we couldn’t see achievement percentages, value-added and the other success metrics that exist in education? Perhaps the answer lies in measuring the decrease of the skills gap?

By placing education in the realms of supply and demand, we’ll create the skills businesses want. Companies and the wider economy should dictate what our young people are learning. Adam Smith will save the day.


About Phill

Phillip is co-founder of Kloodle.

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